One of the major concerns most people have in nursing home planning is how to protect their assets from being completely exhausted by nursing home expenses. Although a trust can be a great strategy, not every type of trust provides the asset protection you need. If you engage in proper nursing home planning, including the use of the right type of trust, you may be able to avoid exhausting your assets just to pay for nursing home costs. Let our Sacramento trusts lawyers help.
What is a revocable living trust?
A revocable living trust, more commonly referred to as a living trust, provides the grantor with the ability to make changes to the terms of the trust, or revoke the trust altogether, at any time while they are still alive. After the grantor’s death, the trust becomes irrevocable. A revocable trust is flexible because it can be modified to account for changes in your circumstances or intentions. With a revocable trust, the trustee does not take control until after your death or incapacity. Because of your ability to modify, the assets held in a revocable trust are still considered to be your property as you never relinquish ownership completely.
How is an irrevocable living trust different?
However, an irrevocable living trust cannot be altered by the grantor after it has been executed. This characteristic can be very helpful. Once an irrevocable trust has been created, the trust assets are in effect out of the reach of creditors and the probate court. They are not subject to estate taxes either. Although you relinquish control over your assets when they are placed in an irrevocable trust, you gain favorable tax consequences.
Using an irrevocable trust as part of your nursing home planning can help you to qualify for Medi-Cal. When you make the transfer of property, you effectively deplete your estate of disposable assets. But, the trust can be drafted to provide you with income produced from the assets it holds.
Most people need help paying for nursing home care
Nursing homes are residential health care facilities which offer skilled nursing care in addition to other supportive services to resident round-the-clock. The average cost of nursing home care in California is approximately $8,500 per month. Most families cannot afford to pay nursing home expenses on their own. With proper planning, using the right kind of trust, we can help you and your family be prepared.
Medi-Cal will only cover “medically necessary” nursing home services
Medi-Cal will only pay for nursing home services when those services are determined to be “medically necessary.” In California, services are medically necessary “when it is reasonable and necessary to protect life, to prevent significant illness or significant disability, or to alleviate severe pain.” The patient’s health care provider must prescribe nursing home care before Medi-Cal will pay for that care. More specifically, the health care provider must establish the need for continual, round-the-clock availability of skilled nursing care or what’s called “intermediate care.”
How Medi-Cal coverage works
Medi-Cal is California’s name for the Medicaid program, which is funded the federal and state government. The California Department of Health Care Services (DHCS) administers long-term care programs in California. Becoming eligible for nursing home services through Medi-Cal can be accomplished in several different ways, all of which Medi-Cal lawyers can guide you through.
Medi-Cal placing limits on a recipient’s income and assets
Individuals can also qualify for Medi-Cal if they have limited income. The limitations on assets are $2,000 for an individual and $3,000 for a couple if they are both seeking Medi-Cal coverage. There are higher limits one only one spouse needs care. Not all types of assets are counted towards this limit. For example, your residence is not counted as long as either your spouse still lives there or you intend to return to the residence once you’re done receiving nursing care. Additionally, one vehicle, your personal belongings, and small burial or life insurance policies are typically not counted.
How do you qualify for Medi-Cal?
Patients already receiving Medi-Cal will automatically qualify for nursing home services. Recipients of Supplemental Security Income (SSI) benefits, participants in the California’s Temporary Assistance to Needy Families program (TANF or CalWORKs), and individuals enrolled in California’s refugee programs automatically qualify for Medi-Cal, and therefore, qualify for nursing home care.
You may be able to “spend down” your assets in order to qualify
In most cases, you will be allowed to “spend down” your assets in order to qualify for Medi-Cal. Spending down means you use your countable assets to pay off certain debts or expenses. Before patients attempt to spend down their assets, it is critical to obtain advice from experienced and qualified Medi-Cal lawyers in order to avoid a penalty period being imposed their benefits.
If you have questions regarding living trusts, or any other nursing home planning issues, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.
Timothy P. Murphy
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